IOC begins petrol production from Rs 34,555 crore Paradip refinery

Prime Minister Narendra Modi will dedicate the 15 MMTPA Paradip Refinery, which will primarily be producing BS-IV fuels and serving the eastern and southeastern markets apart from exports, to the nation on February 7.PTI | January 18, 2016, 08:09 IST

PARADIP (ODISHA): Indian Oil Corporation's latest refinery in Paradip, the first in over a decade for the nation's largest fuel major, started production of petrol from the Rs 34,555 crore facility on Sunday.

Prime Minister Narendra Modi will dedicate the 15 MMTPA Paradip Refinery, which will primarily be producing BS-IV fuels and serving the eastern and southeastern markets apart from exports, to the nation on February 7.

The commissioning of the refinery comes after 14 years, owing to many flip-flops by the Naveen Patanik government on incentives, withdrawal of its foreign partner Kuwait Petroleum and stiff frequent opposition from locals, state politicians and NGOs apart from two killer cyclones.

The foundation stone for the refinery was laid by former Prime Minister Atal Bihari Vajpayee in May 2002, which again was a full one decade after the project was proposed by the PV Narasimha Rao government in July 1992.

"We have completed one of the most critical steps of the refinery today. With our 3.9 MMTPA motor spirits unit going critical, we have only VGO-HDT (vacuum gas oil hydrotreater) to be commissioned that will be done by mid next month.

"This refinery complex is the most modern facility in the country and also our first and the largest greenfield facility on the East Coast," Ramjee Ram, executive director in-charge of the Paradip Refinery project, told reporters during a plant visit ahead of the formal commissioning.

This 15-million tonne refinery is also the largest on the country's Eastern coast, and is equipped with the latest technology, including IOC's own patented IndMax technology for better and higher LPG output.

The Rs 34,555-crore project, which had incurred a cost overrun of over Rs 3,500 crore due to delays that it had to face apart from two cyclones, is coming up at a 3,350 acre area adjoining the Paradip Port.

The project includes a sprawling, modern residential complex that boasts of a Delhi Public School, a modern stadium complex, among others.

The refinery complex spans over 2,100 acres, while the proposed Rs 35,000-crore petchem will come up on the north bank of the jetty.

It also has a 17 metre deep natural draft for its oil jetty that can berth very large ships and has captive multi fuel power plant that can generate over 360 MW electricity.

Though the refinery will primarily be processing high-sulphur crude oil, cheaper by $2-3 a barrel, Ram said the facility can process any type of crude from the Gulf nations, Africa and South America.

However, he was quick to add that a final call on the feed will be taken by the central procurement cell, which decides mix of the crude to be sent to different refineries.

Due to the high-end technology being deployed, the company expects the refinery to offer very high margins to the tune of $ 6-7 a barrel over the average refining margin $ 10-12 earned by IOC at present.

"We expect our GRM to be in the range of $ 15-16," Ram said. This is expected to boost the bottom line of IOC as it will improve the overall gross refining margin (GRM) by $ 2-3 a barrel, Ram said.

The Rs 34,555-crore project, which had incurred a cost overrun of over Rs 3,500 crore due to delays that it had to face apart from two cyclones, is coming up at a 3,350 acre area adjoining the Paradip Port.

On fuel quality, Indrajit Bose, executive director for branding and corporate communications, said the refinery can produce low-emission BS-IV-compliant motor fuel, and thus gives IOC an upper-hand as the country goes for stricter regulations on pollution front.

"We can even step it up to produce BS-VI-compliant automobile fuel with the addition of a few equipments. A study is on to ascertain the market and investment required for this purpose," Bose said, adding that the incremental cost for upgrading to BS-VI will be around Rs 3,500 crore.

The government had earlier this month announced that the nation would be skipping BS-V norms and jumping directly to BS-VI by April 2020, which will involve at least Rs 21,000 crore additional investment for the industry.

Paradip will be IOC's first refinery to be integrated with a petrochemical complex which will involve an investment of another Rs 30,000-35,000 crore.

While the work on a polypropylene unit inside the 3,350-acre refinery complex is already on, it intends to begin work soon on methyl, ethyl, glycol plant, coke gasification unit, paraxylene plant and purified terephthalic acid project for which approvals are pending.

Ram said though normally a new refinery runs at 60 per cent capacity initially, and takes 2-3 years to reach full capacity, the 3,00,000 barrels a day refinery is designed to to attain 80 per cent capacity to begin with and full capacity by next March, thanks to newer technologies being installed at the facility.

The refinery will produce LPG, propylene, petrol, diesel, naptha, kerosene ATF and pet coke, which will mainly serve the Eastern and South-Eastern markets.

"Though our priority will be domestic market, depending on the price advantage, some products can be exported taking advantage of the refinery's location on the eastern coast," Bose said, adding that with this its total capacity will increase to 85 MMTPA.